Financial Tips For Women Getting Divorced

No one gets married with the intention of getting divorced, but the unfortunate reality is that divorce happens, and it happens often. As a woman, it’s not enough to be emotionally prepared for a divorce, you need to be financially prepared as well. Whether you’re the family’s breadwinner or a stay-at-home mom, your responsibilities are going to be numerous as you embark on the journey to ending your marriage.

In order to ensure you navigate that road smoothly and safely, I want to share these Financial Tips for Women Getting Divorced.

Don’t Go For EVERYTHING

Rare is the divorce that isn’t embroiled with visceral emotion.

Anger, bitterness, resentment…these are all feelings you will not only experience but experience intensely.

That is why it’s so important to get these feelings under control before they can control you.

When anger or bitterness take over they can drive you to go for EVERYTHING in your divorce settlement.

Here’s the problem…going for “everything” will typically cost you more than it’s worth.

Divorce is all about negotiation.

Negotiation requires tact and compromise. You must quickly accept the reality you will NOT get everything you want in a divorce—but neither will your soon-to-be ex.

Identify the “wins” that are most important to you and focus on securing those. Let the extras fall by the wayside.

Yes, it may sting to see your spouse walk away with “X” or “Y”, but that sting will be FAR less painful than a long, drawn-out (expensive!) divorce.

Don’t Be Penny-Wise and Pound-Foolish

Yes, lawyer fees are inconvenient.

Yes, lawyer fees are costly.

But one of the biggest mistakes you can make in any divorce is getting cheap with your lawyer.

Here’s the stark reality:

All lawyers—like all accountants, bankers, doctors, journalists, etc.—are not the same. Some are flat-out better than others.

Divorce is not the time to look for a discount professional.

If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. – Red Adair

Too often women going through a divorce focus on the short-term cost of hiring an attorney—you need to think big picture and long-term. What are a few hundred dollars today in exchange for getting what you really want in the settlement?

Now, this isn’t to say that an expensive attorney will automatically be a great hire.

You’ll need to shop around, read reviews, and—where possible—get references from previous clients. Schedule introductory meetings with attorneys you’re interested in hiring and feel them out. It might seem excessive but remember you’ll be giving this person thousands of your hard-earned dollars and they’ll be representing you in a courtroom.

You MUST Budget

Divorce—especially if there are minor children in the marriage—can take time.

A lot of time.

Anything that involves time and the courts also involves money.

Many divorcees mistakenly believe splitting up will only take a couple of months, and that there’s no need to plan for long-term legal expenses or other associated costs.

But divorce can take more than months, it can take years.

The longer the divorce, the more financial planning (and budgeting) you’ll require, a financial organizer can really help you with this.

When you and your spouse make the decision to end the marriage—even if you make that decision amicably—always anticipate a contentious and costly divorce.

Identify your current living costs and use those costs to predict your living expenses for the future. Not only will this improve your ability to budget in the short-term, it will also leave you with a clearer picture of what you’ll need in terms of alimony.

Keep copies of these financial documents in a secure (private) location.

These documents will become very important the further you progress into your divorce. And the best way to ensure you don’t miss anything is with divorce worksheets & checklists.

Once you’ve accounted for your various shared-financial accounts, start opening replacement accounts in your own name.

At the most basic level, you’ll need your own checking and savings account…You’ll probably want your own credit card as well.

To ensure there’s zero-risk of an accidental joint account being created, work with brand-new banks—banks neither you nor your spouse currently do business with.

As you open your new accounts, check-in on your credit score and ensure its accuracy. As a soon-to-be single woman, you’ll need a good credit score to do basic things like refinance the mortgage, rent an apartment or borrow for a new car.

Saving For Retirement

Divorcing your spouse can substantially impact your retirement planning. First of all, if you have a shared 401(k), that may have been liquidated in the divorce; you’ll have to reinvest it. Secondly, you’ll have to figure out retirement from your new financial perspective. You have less money coming in, and different opportunities to invest for retirement, such as your own company’s 401(k) or even your own investment planning. Once you’re clear of the divorce, start looking into retirement; otherwise, your divorce may have longer-term consequences than you think.

You’re Still On The Hook For Joint Debt

Unfortunately, a divorce decree isn’t something credit card companies care about. Your spouse could have been ordered by the court to pay off a joint credit card, or have gotten the house in the settlement, but if they don’t pay the bills, your name is still on it. So it’s your door they’re going to be knocking on, and it’s your credit that can suffer as a result.

The good news about all of this is that you can anticipate and plan for it. With a good financial planner at your side, you’ll be able to roll with the fiscal punches that come with divorce and come out a better, financially healthier, person.

Bonus Tips

#1 Keep Your Eyes OPEN

It should come as no surprise that spouses can be dishonest and that dishonesty goes beyond infidelity.

As you wade deeper and deeper into the muddy pool of divorce, your spouse may try to hide financial assets they don’t want to share. And there’s NO shortage of ways to go about hiding assets either—stashing cash, lying on tax returns, transferring property titles, etc.

As someone going through a divorce, one of the BIGGEST mistakes you can make is to stop paying attention to your shared financials. Until the paperwork is FINAL and the divorce COMPLETE in the eyes of the court, there’s a lot at risk monetarily speaking. So keep your eyes open and watch out for anything that looks unusual.

#2 Update Your Beneficiary Forms

If you put down your spouse as your beneficiary, don’t wait: Change the forms now. Some forms of insurance simply won’t pay out to anyone under the age of eighteen, and as a result, if something happens to you, the money from those policies may go to your former spouse. Make the phone calls and get those forms changed.

#3 Taxes & Your Legal Marital Status on December 31st

One of the most unpleasant quirks in the tax code is that when you file taxes, your current marital status doesn’t matter; what matters is your legal marital status on December 31st of the tax year. Even if you were in the middle of a divorce, even if your spouse has moved out and the paperwork was being processed, if you were married then, you’re married for the purposes of taxes still. Sit down with your spouse and work out how, precisely, you’re going to file. Otherwise, you may find yourself with a far nastier surprise during the next tax cycle.

#4 Determine What’s Individual Property and What’s Shared

Unless you sign a prenuptial agreement, which is still a fairly rare situation even today, anything acquired after the marriage is made legal is considered “shared property”. If your former spouse got money from his or her company for a 401(k), that’s technically shared property which should be divided. If you got a gift from your spouse, that’s not technically yours: It’s shared property. Make a list of what’s shared and what you had before the marriage began so that if you have to go to court, you can keep your assets. I’ve found an important subset of that is…

#5 Decide About The College Fund Early

If you have children, they likely have a college fund, and that college fund was likely opened while you were married. It’s shared property, and you have to decide who has stewardship over that money. Some of the bitterest fights I have seen over money during a divorce have involved college funds, so make a point to settle early who gets control of the fund. It’ll save you a lot of aggravation and bitterness later.

#6 Get Your Own Health Insurance

One of the ugliest shocks many of my clients get comes when the divorce goes through and they discover just how much coverage under COBRA will actually cost them. Some aren’t even aware that they’re uninsured until that letter comes in the mail.

The best thing to do to solve this problem is to simply get insurance of your own, whether through your employer or by other means. While it probably won’t cover quite as much as your spouse’s plan, you will at least be covered if the worst happens.

#7 Retirement Plan Division & Penalties

You may be entitled, under the law, to half of your spouse’s retirement plan. But do you know what the penalties for withdrawing the money early might be, in terms of taxes? Should you use it now for current needs, or start socking it away for retirement? It’s important to discuss these issues with a financial planner, otherwise you may find yourself struggling with them sooner than you think.

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I’m Russ Thornton, founder of Wealthcare For Women, and I've been a financial advisor for over 23 years. I am committed to helping women gain the comfort & clarity necessary around money to live a better life.

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